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Chorus Aviation won’t continue to help Pluna

June 18, 2012, Montreal - Chorus Aviation says it won't invest more money as a Pluna shareholder to bail out the Uruguayan airline from the financial difficulties it faces.


June 18, 2012
By The Canadian Press

Spokeswoman Manon Stuart said Friday the Halifax-based company "has no intention to invest additional funds,'' in the airline that has faced serious financial difficulties for several months, which has nearly led to its bankruptcy.

In 2010, Jazz, as it was then called, invested $15 million to acquire a 25 per cent stake in the South American national carrier, which connects the capital Montevideo to several neighbouring countries.

It marks the second failed attempt by Chorus to become less dependent on Air Canada, its former parent company for which it provides regional service under a capacity purchase agreement.

In April, tour operator Thomas Cook Canada Inc. made an early exit from its five-year agreement with Chorus, citing market conditions. The contract provided $100 million in annual revenues.

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Chorus operated a fleet of six Boeing 757 jets for the British vacation company since 2010 to sunny destinations during the winter season to the Caribbean, Mexico and Central America. The deal had another three years left.

In a letter sent to employees earlier this month, Pluna CEO Matias Campiani expressed concern that the company would "collapse.''

After experiencing the region's highest growth over the past two year, he said Pluna faced headwinds such as slowing economies in South America, the introduction of protectionist measures in Argentina and a price war.

According to the Uruguayan newspaper El Pais, the country's government wants to take over management of the company while it seeks new investors. The government wants Chorus to reinvest in Pluna.

Stuart denied the report that Chorus is analyzing whether to invest more, but wouldn't say if the holding company is considering a writeoff of its investment.

Chorus holds 33 per cent of the shares of Sociedad Aeronautica Oriental (ODS) which, with the investment firm Leadgate Latin American, controls 75 per cent of Pluna. The Uruguayan government owns 25 per cent of the carrier.

Pluna's bankruptcy could also have important implications for Export Development Canada. The Crown corporation provided a US$120 million guarantee for the purchase of Bombardier CRJ900 regional jets in 2010 and 2011.